Two Thirds of Canadians Waiting on Inheritence to Fund Retirement

[Jennifer in Ottawa]

https://ca.finance.yahoo.com/blogs/pay-day-/two-thirds-canadians-waiting-inheritance-fund-retirement-181710970.html

Favourite quote from the article: "but at least they aren’t the 34 per cent from the BMO study expecting to win the lottery"

[Cpa Cat]

I know from experience that this is a silly retirement plan!

My father had a high-powered career and made a lot of money. The kids assumed a big inheritance would be forthcoming. Instead, it turned out that he had a pension that would not pass to children and the spousal remainder was not enough to support the standard of living that my stepmother was accustomed to.

Instead, a relatively small inheritance passed to the kids (about $30,000 each). And my stepmother had to sell her house, cottage and rental property because her financial reality was such that she could not support the properties. Nothing was paid off.

It turned out that although my dad made a lot of money - he also spent a lot of money. He made no real effort to save for retirement, because he had his pension and he was convinced that he would die early (he was right).

[trailrated]

But before we go calling the kids greedy, the HomEquity Bank survey says 94 per cent of respondents expecting an inheritance are willing to give up half of it to maintain or improve their parents’ lifestyle

How very generous of them... wtf?!

[marty998]

Yes because when you're 6 feet under pushing up daisies you need all the gold trimmings. Being dead is hard spendy work!

[agent_clone]

But before we go calling the kids greedy, the HomEquity Bank survey says 94 per cent of respondents expecting an inheritance are willing to give up half of it to maintain or improve their parents’ lifestyle

How very generous of them... wtf?!

To which my response would be, its the parents money not theirs.

For myself, I have told my parents that I don't care if they leave me an inheritance or not, so long as they don't leave me debts to pay (although I understand that debts are not transferrable in Australia except to partners upon death).  At this point in time I expect to inherit 1/2 a house, and some money, however if I don't get that, thats fine.  My plans don't include this money but it would be a nice bonus.

As far as I'm concerned, my parents earnt their money (they inherited little if anything), they should feel free to spend it as they see fit.

[Thespoof]

Inheritance? LMAO I'll be lucky if I don't end up supporting my dad until he dies. I have no one leaving me a penny.

[johnintaiwan]

my parents have a decent amount of money and property, but they are fairly young. I expect i will already be at least 60 if not older by the time I would inherit anything. I hope to be retired much earlier than that

[zolotiyeruki]

In my retirement planning, there are two things on which I am NOT planning:  an inheritance and Social Security.  Sure, I'll get some from SS once I hit 65, but given how the trust fund is expected to run out way before I hit that age, I'm not anticipating much.  As for inheritance...well, if I get some, it'll simply accelerate my retirement (assuming I'm not already retired at that point)!

[SpeedReader]

My remaining parent has dementia.  If I lived in a country with civilized ideas about healthcare, there might be a chance of an inheritance -- but I live in the U.S., so not so much. 

[Erica/NWEdible]

Who actually EXPECTS any help - be that inheritance, social security, or magic unicorns sprinkling shiny gold coins down from above? I honestly think that counting on someone else to do your saving and planning for you is just foolish. I have known several people quite well who consider their parents to be their retirement plan and I think that entitlement mentality is distasteful, and tends to be a handicap on the road to adulthood.

[SpeedReader]

I agree that the "my parents owe me" mentality is rather shameful, and I hope my earlier comment wasn't taken as me feeling entitled to receive an inheritance.  My parents worked hard, lived pretty frugally, and they wanted to leave something to their kids.  Instead, because of our for-profit health system, we're concerned whether there will be enough to pay for care of a long-term, debilitating disease.  That's what I was really being a complainy-pants about.

But what's wrong with expecting to receive Social Security when that's the agreement the Government has made with those of us who've paid into it for the last +30 years?  It's certainly not my only retirement plan (or I wouldn't be an MMM reader!) but why shouldn't I expect that at least something will be forthcoming from the program?

[Ottawa]

Who actually EXPECTS any help - be that inheritance, social security, or magic unicorns sprinkling shiny gold coins down from above? I honestly think that counting on someone else to do your saving and planning for you is just foolish. I have known several people quite well who consider their parents to be their retirement plan and I think that entitlement mentality is distasteful, and tends to be a handicap on the road to adulthood.

Exactly!  Part of the Mustachian ethos includes safety margins in FIRE planning.  I don't even count 'for granted' future government pensions in the form of Old Age Security and Canada Pension Plan, indeed - even my Federal Government Work Pension Plan (Defined Benefit).  Part of the reason for this is that I will be FIRE long before those pensions kick in.  We'll be counting on the 4% rule to fund retirement from our saved 'stache.  I expect at age 60 we won't need the 45K plus that will start to come in annually.  Thus, we'll be able to do our charitable work then!

[Zamboni]

magic unicorns sprinkling shiny gold coins down from above

This is what I am counting on.  It's more likely than inheriting money, which is fine with me.

[quilter]

This was a friend of ours plan. While we did the frugal thing of LBYM he thought he had it all sewn up with the wealthy parent thing.   Every single aspect of our lives, from cars to houses to eating was cheaper.

Fast forward to now. His dad died with small pension survivor option. Mother  moves in with divorced single parent sister, sells heavily mortgaged house.   
Friend is now expecting nothing. Last time we saw him he told us he will be working till he is 80. We retired years ago.

[Erica/NWEdible]

I agree that the "my parents owe me" mentality is rather shameful, and I hope my earlier comment wasn't taken as me feeling entitled to receive an inheritance.  My parents worked hard, lived pretty frugally, and they wanted to leave something to their kids.  Instead, because of our for-profit health system, we're concerned whether there will be enough to pay for care of a long-term, debilitating disease.  That's what I was really being a complainy-pants about.

But what's wrong with expecting to receive Social Security when that's the agreement the Government has made with those of us who've paid into it for the last +30 years?  It's certainly not my only retirement plan (or I wouldn't be an MMM reader!) but why shouldn't I expect that at least something will be forthcoming from the program?

No, I wasn't commenting at you specifically. I agree that the US medical care system and particularly end-of-life care (or as it often becomes, delay-of-death care) is redonkulous. We have done a bang-up job paying more money for poorer health outcomes than pretty much the rest of the first world. Don't even get me started.

I think it's awesome for parents to leave a legacy to their children. My ideal scenario would be to raise kids who don't expect a dime from me, and then leave them a big fat FIRE enhancing inheritance after my husband and I have had all the fun with it we can and shuffle off this mortal coil. But the key for me is "kids who don't expect a dime" - proof that they are fully fledged adults who can take care of themselves.

Re: Social Security - I think that's just a philosophical disagreement. I just don't trust that SS will necessarily be there in any kind of useful way in 30 years, so I don't count it. I also don't count housing equity or funds earmarked for kids college when doing the FIRE calculations. Yes they are part of our net worth, but they aren't part of the retirement savings. I have a very narrow view of what I'm willing to "bank" on for ER, I guess, and SS doesn't make the cut.

[Villanelle]

This was a friend of ours plan. While we did the frugal thing of LBYM he thought he had it all sewn up with the wealthy parent thing.   Every single aspect of our lives, from cars to houses to eating was cheaper.

Fast forward to now. His dad died with small pension survivor option. Mother  moves in with divorced single parent sister, sells heavily mortgaged house.   
Friend is now expecting nothing. Last time we saw him he told us he will be working till he is 80. We retired years ago.

The notion that one one expects an inheritance and bases retirement decisions on that is odd enough, but to do that without ever discussing it with the parents and being certain of the the situation is even more astounding.  He just assumed there was money, and that it would come to him, based on nothing but a hunch?

I am all but certain I will be getting a sizable inheritance someday.  (I like to say I anticipate an inheritance, as that sounds less entitled than "expect an inheritance", but it's really semantics, I guess.)  But I base that not on looking at my parents' lifestyle or their spending habits or anything else.  I base it on the fact that I have been flat out told that I will inherit, and what the numbers will look like.  And still I don't make retirement decisions based on that money.  But to just assume that there's money and that it is coming to one, and then to integrate that assumption in to a plan?  The mind boggles at the stupidity and presumption.  "I'm sure there's money, and I'm sure I'll get it."  Really????

[oldladystache]

I think it's awesome for parents to leave a legacy to their children. My ideal scenario would be to raise kids who don't expect a dime from me, and then leave them a big fat FIRE enhancing inheritance after my husband and I have had all the fun with it we can and shuffle off this mortal coil. But the key for me is "kids who don't expect a dime" - proof that they are fully fledged adults who can take care of themselves.

My brother and I were in our 60s when we were told about the income we would receive on our parents' death.  It's enough to live on very well. Added to the amounts we've already accumulated we don't even know what we'll do with it. If we ever get it. Our dad's almost 100 and in amazingly good health.

I'm glad we weren't told when we were younger.

[Brian Fellows]

Put me in the camp of people that assume they'll inherit debt, if anything at all.  My dad and mom are separated.  Both are good savers, but were never amazing earners.  My dad got catastrophic, should-be-dead sick in his early 50s and that drained a ton of his money (he luckily had a disability insurance policy that is paying out now).  My mom CLEVERLY just got a 30 year mortgage at age 55 for a four bedroom house with her new husband... who has two different credit card companies garnishing his wages and his current retirement plan is a pension that has approximately $34,000 in it...

My grandparents are all pretty wealthy, so I think both of my PARENTS can count on something from them, but I am literally saving money specifically with the assumption I'll need to help with my mom's expenses within the next twenty years.

[maizefolk]

If I'm paying into Social Security with the understanding that the government is collecting the money to pay back to me when I'm older then why shouldn't I have some expectation of getting some of that money back when I'm older? Either phase Social Security out and allow me to save more of that money myself or stop making such a big deal about someone having "entitlement mentality" with regards to Social Security since you are legally entitled to the monies by laws that were enacted back in 1935.

I think we are seeing different shades of meaning in the word "expect." From the definitions that pop up in google, here are two that illustrate the divergence:

(A) "require (someone) to fulfill an obligation" ie "we expect employees to show up to work on time"
(B) "regard (something) as likely to happen" ie "we expect rain later this week"

So, given the 12.4% tax I pay into the social security trust fund (or 6.2% depending on the source of income), I expect (definition A) that the United States will pay a useful sum on money to me each month once when I reach conventional retirement age. However, at the same time, given the the general bias I see of lawmakers towards short term solutions regardless of the long term consequences, I do not expect (definition B) to see any real return for those same tax dollars when I reach conventional retirement age.

[zolotiyeruki]

My comment on not expecting SS payments is based on projections that the SS trust fund is expected to run out in 2037, at which point FICA taxes (if left unchanged) will only cover about 75% of the promised payments.  Given that one party refuses to cut spending (or even the rate of increase of spending) and the other party is dead set against raising taxes (of any sort), I'm not completely convinced that the US government will be in a position to even meet that 75% projection.  Call me cynical if you wish :)

[Jennifer in Ottawa]

Count me in cynic camp as well.  I pay into CPP, have for years, and will for years, but I am certainly not relying on CPP benefits as part of my financial planning. 

My husband pays but will never effectively collect it since his pension will be reduced dollar for dollar once his CPP starts.  If I ever collect, it will just be bonus fun money.

[Zamboni]

I know this isn't how it is set up, but this is how I view social security:

I pay into it, my grandparents and now parents withdraw from it.  There are also old and/or disabled people like my great aunt who don't have children or other relations paying in who draw from it, so I see it as my obligation to care for them as well.  It's like a shell game of transferring my earnings to them.  I would support some of these people who can't work full time in the absence of the shell game, but this allows them to have income without feeling like a burden on me.

All of that being said, put me in the camp of not counting on it to fund my own retirement.  Anything I get from social secuirty will just be bonus money.

[daverobev]

Count me in cynic camp as well.  I pay into CPP, have for years, and will for years, but I am certainly not relying on CPP benefits as part of my financial planning. 

My husband pays but will never effectively collect it since his pension will be reduced dollar for dollar once his CPP starts.  If I ever collect, it will just be bonus fun money.

You know how CPP is set up? Totally independent management - basically like investing in a broad-based, international ETF. Self sustaining, etc.

OAS/GIS - sure, I can see them being reduced or more heavily clawed back. But CPP... I think will be giving a decent pension to many Canadians. And by decent I mean by Mustachian standards, not middle class-new car every 3 years standards!

The UK National Pension, US SS, etc are like OAS. But the CPP is different.

[agent_clone]

Put me in the camp of people that assume they'll inherit debt, if anything at all.  My dad and mom are separated.  Both are good savers, but were never amazing earners.  My dad got catastrophic, should-be-dead sick in his early 50s and that drained a ton of his money (he luckily had a disability insurance policy that is paying out now).  My mom CLEVERLY just got a 30 year mortgage at age 55 for a four bedroom house with her new husband... who has two different credit card companies garnishing his wages and his current retirement plan is a pension that has approximately $34,000 in it...

My grandparents are all pretty wealthy, so I think both of my PARENTS can count on something from them, but I am literally saving money specifically with the assumption I'll need to help with my mom's expenses within the next twenty years.

Be aware that often you can't inherit your parents debts.  You may need to look into your countries/states laws (I think some US states have something about being a dependant for inheriting debts).  If the debt collectors come tell them to go away (just check the laws for your location first though).

[Jennifer in Ottawa]

Count me in cynic camp as well.  I pay into CPP, have for years, and will for years, but I am certainly not relying on CPP benefits as part of my financial planning. 

My husband pays but will never effectively collect it since his pension will be reduced dollar for dollar once his CPP starts.  If I ever collect, it will just be bonus fun money.

You know how CPP is set up? Totally independent management - basically like investing in a broad-based, international ETF. Self sustaining, etc.

OAS/GIS - sure, I can see them being reduced or more heavily clawed back. But CPP... I think will be giving a decent pension to many Canadians. And by decent I mean by Mustachian standards, not middle class-new car every 3 years standards!

The UK National Pension, US SS, etc are like OAS. But the CPP is different.

Oh, I am aware of that, but the earliest I could collect anything is around 16 years, 21 if I don't want it reduced.  An awful lot can happen in the timeframe, and I prefer to hedge my bets by being cynical about collection.  Either way I win.

[frugalecon]

My comment on not expecting SS payments is based on projections that the SS trust fund is expected to run out in 2037, at which point FICA taxes (if left unchanged) will only cover about 75% of the promised payments.  Given that one party refuses to cut spending (or even the rate of increase of spending) and the other party is dead set against raising taxes (of any sort), I'm not completely convinced that the US government will be in a position to even meet that 75% projection.  Call me cynical if you wish :)

I am always surprised by the extreme pessimism people have about Social Security. I think if overlooks the fact that older people vote, and politicians will do their best to keep the dollars flowing to them. While the shortfalls sound large in absolute terms, relative to the size of the economy they are fairly modest and could easily be addressed by relatively minor changes to taxes and benefits. It does seem likely that there will be some haircut on benefits, especially for upper-income retirees. This could take the form of slower cost-of-living growth and increasing the share of benefits that are taxable. It does seem likely that there will be some modest adjustment to the tax rate on wages at some point, too. Perhaps benefits will grow at a slower rate than the cap on taxable earnings.

Medicare seems like a bigger issue. Certainly the financial hole is larger. Of course, b/c money is fungible, there is not much difference between cutting SS benefits and leaving Medicare more-or-less unchanged and doing the reverse. Personally, I would be in favor of having a reasonably-priced basic Medicare available to all, with the option that people could purchase insurance for things like expensive end-of-life care if they want it. A lot of money gets spent in that last few months, largely to no good effect.

[SpeedReader]

I think Maizeman nailed the semantics difference -- SS payments "likely to happen" versus "being relied on as an income source by MMM readers". 

[Jouer]

I think this article misrepresents the question asked in the survey. It's not 35% "waiting" for an inheritance - it's 35% that think they will be getting one. Ipsos, in their own write up on their web site, uses the headline that almost half (45%) do not expect to receive an inheritance.

Still not sure where they are getting the two-thirds number.

(I've had my own research misrepresented a few times by reporters - bit of a pet peeve of mine.)

[Guses]

Count me in cynic camp as well.  I pay into CPP, have for years, and will for years, but I am certainly not relying on CPP benefits as part of my financial planning. 

My husband pays but will never effectively collect it since his pension will be reduced dollar for dollar once his CPP starts.  If I ever collect, it will just be bonus fun money.

As another member was saying, CPP is not social security, it is a pension managed separately from social security (i.e., Government managed) programs.

Here is an excerpt from the latest actuarial report (http://www.osfi-bsif.gc.ca/eng/oca-bac/ar-ra/cpp-rpc/pages/cpp26.aspx).

"Under the 9.9% legislated contribution rate, the assets are projected to grow rapidly over the next decade as contribution revenue is expected to exceed expenditures over that period.  Assets will continue to grow thereafter until the end of the projection period, but at a slower pace, with the ratio of assets to the following year’s expenditures expected to reach a level of 6.0 by 2050.  Thus, despite the projected substantial increase in benefits paid as a result of an aging population, the Plan is expected to be able to meet its obligations throughout the projection period and to remain financially sustainable over the long term. "

Regarding your husband's pension, he probably has bridging between his employer and CPP. That means that he pays CPP now and pays less than his share of his employer pension plan (i.e., he pays his share minus his CPP contributions). When he retires, CPP and his employer will coordinate benefits so that he gets what he is entitled to.

It is basically a convenience and efficiency feature so that your husband does not have to pay his full CPP + his full pension. What he pays for, he will get. There is no cynicism required, only understanding of the underlying pension plans.

I fully intend and expect (both definitions) to collect my share of CPP and Employer Pension when I retire.

[SpareChange]

I may or may not get a modest inheritance from my parents. They have expressed a strong desire to leave their land holdings to me...about 80 acres, but who knows what could happen in the meantime. They've never managed their money very well, so I don't think about it or include it in my own retirement plans.

As far as Social Security...I really wish I had the choice to opt out of it. At least for the retirement part. Mustachian investing of another 10% or so of my compensation would get me to ER much more quickly. Sure as hell long before 67. :)

[golden1]

Who actually EXPECTS any help - be that inheritance, social security, or magic unicorns sprinkling shiny gold coins down from above? I honestly think that counting on someone else to do your saving and planning for you is just foolish. I have known several people quite well who consider their parents to be their retirement plan and I think that entitlement mentality is distasteful, and tends to be a handicap on the road to adulthood.

Agreed, it is a much healthier and happier way to live if you make your retirement plans based on your own savings and assets.  As a gen Xer I don't ever include SS in my retirement plans.  If it is still there, it will be a nice bonus.  I am almost positive I won't be receiving any money from relatives either but if it happens, it will be a surprise, not an expectation.

[LWYRUP]

My remaining parent has dementia.  If I lived in a country with civilized ideas about healthcare, there might be a chance of an inheritance -- but I live in the U.S., so not so much.

I just wanted to step in here to note that Medicare in the U.S. is a lot more generous with respect to dementia than the NHS in Britain. 

I very much support universal healthcare (I would like a system where the government provides a basic standard of care and individuals can choose to supplement with private insurance if they want more) but it is not true that the U.S. is some barbaric evil country and everywhere else is utopia.  Lots of countries have issues with their healthcare systems or have systems that are great but completely unsustainable given the country's debts and demographics.   

[SpeedReader]

I'm just beginning as an Alzheimer's care-giver, but so far it appears that the person's assets must be drastically spent down before Medicaid pays, and that Medicaid can claw funds back from an estate.  Also, not every memory care facility will accept Medicaid patients.  Medicare doesn't pay for long-term custodial care at all. 

All I know about the NHS, I read in a book by a British woman caring for her mother.  Her book said that when the family could no longer cope, the NHS had to find her mother a placement.  This doesn't happen in the US.  It's my understanding that finding a decent, safe facility when the time comes -- and arranging all other care until then -- will be my responsibility.  There's no Government agency to turn to. 

Apologies to the group for hijacking the thread.